Enterprise software market growth: driving demand in technology services

19/06/2019
Insights
Maurice Watkins

The continued global growth of the enterprise software market will drive ongoing demand for expert technology services companies. Enterprise software market applications automate and support a range of administrative and operational business processes of the enterprise, including its sales & marketing, financial reporting, human resources, and supply chain.

With the economic and efficiency benefits of software automation being fully realised, there is an ever-increasing demand for software and the corresponding implementation and maintenance services that come with a more complex technology environment. Overall, the enterprise software market is expected to reach $575 billion by 2024.

This expanding market opportunity has led to an aggressive acquisition strategy by traditional software publishers trying to preserve their thought leadership and market share in this age of nimbler and cheaper cloud only applications. Large software players such as Oracle, SAP, IBM, and Microsoft have all purchased niche providers to selectively expand capabilities and eliminate white space in their technology stacks. In 2018, the top 10 enterprise software transactions counted for $87 billion in value alone including SAP’s acquisition of Qualtrics, a pioneer of experience management software that enables organisations to deliver superior customer, employee and brand experiences; Salesforce’s acquisition of Datorama, a provider of AI-powered marketing intelligence and analytics; and Workday’s acquisition of Adaptive Insights, which will help customers accelerate their finance transformation in the cloud.

To keep up with the demand, the global technology service providers (consultancies, systems integrators and business process outsourcing companies) are in the midst of addressing the need to continually evolve and develop new skills as the large software vendors continue to consolidate – the general consensus being that those that are successful will have a depth and breadth of capabilities across its portfolio. They can either do this through training in-house, developing customised automation tools or the acquisition of niche service providers possessing scarce knowledge and skills.

Business consulting firms like Accenture and Deloitte as well as IT services firms like Capgemini and DXC Technology are all looking at both large and small acquisition targets that specialise in implementation and cloud migration services. Examples include Accenture’s acquisition of DAZ Systems, a provider of Oracle ERP Cloud services; Capgemini’s acquisition of Lyons Consulting Group, an award-winning digital and global commerce service provider with deep expertise in Salesforce Commerce Cloud; and Sykes’ acquisition of Symphony Ventures, an RPA consultancy working with the likes of BluePrism and UiPath (Results International advised on this transaction).

As the demand for enterprise software outpaces the availability of implementation skills, we expect a continued emphasis by the large technology service acquirers to purchase smaller, platform-specific integrators in a ravenous grab for technology talent.

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